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September 17, 2020
All Articles by: Mr. M. GOVINDARAJAN       View Profile
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Seizure of goods

Section 67(2) of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides that where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.

Section 67(6) provides that the goods so seized shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.

Section 129 (3) provides that the proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty after giving the person concerned an opportunity of being heard.

Valuation a ground for seizure?

There shall be sufficient reasons to seize the vehicles and the goods contained therein.  Whether the valuation will be a ground for seizure?  Whether the Authorities may seize the vehicle and the goods for the sole reason that the goods are sole below the value of MRP?  The following case law gives answer to the above questions-

In ‘K.P. Sugandh Limited v. State of Chhattisgarh’ – 2020 (3) TMI 890 - CHHATTISGARH HIGH COURT, the petitioners are the manufacturers of pan masala and tobacco products.   On 14.01.2020 the petitioners dispatched goods both the products to its customer vide Maxi Truck Plus 2.3 TPS No. CG 04 ME 3494 belonging to Shyam Transport Company.  While the goods were being transported, the petitioners had issued with a tax invoice as well as E-way bill generated and handled the same to the in charge of the conveyance.  The vehicle was intercepted while it was on its way to Raipur on 14.01.2020 by the officials.  The driver was asked for the details of the consignment.  The driver produced before them the relevant invoice bill and also the e-way bill. 

However the officials seized the vehicle and the goods on the ground that there are discrepancies in the valuation of the goods.  The vehicle and the goods were detained.  A notice was issued on the same day in Form GST MOV – 07 under the Central Goods and Services Tax Act, 2017 to the driver.  The petitioner immediately replied to the show cause notice.  The Authorities did not consider the submissions made by the petitioners and they have assessed the tax payable on the goods as also the penalty applicable on the said assessment made for the purpose of releasing of the goods and the vehicle.  The petitioner challenged the said order in this writ petition before the High Court.

The petitioners submitted the following before the High Court-

  • The discrepancy in the valuation of goods is not a ground which would be available for the Department for detaining and seizure of the vehicle and goods.
  • While intercepting the vehicle carrying goods all that the Authorities have to certify is that whether the person in charge of the conveyance has the invoice bill for the goods being transported and whether the deriver also has the e-way bill.
  • At the moment the Authorities found that there was discrepancy in the valuation they could not have seized and detained the vehicle or the goods rather should have permitted the vehicle to proceed further to the destination.
  • In respect of dispute on valuation, the Authorities could have initiated a proceeding against the petitioners in accordance with law as is applicable for evasion of tax. 
  • The seized goods are perishable.
  • If the goods are not immediately released, the petitioners shall be put to substantial irrecoverable loss for no fault of their.
  • The show cause notice did not specify details of evasion of tax except a bald allegation of discrepancy in valuation.

The Authorities submitted the following before the High Court-

  • During the course of inspection of the conveyance discrepancies were found in the valuation of the goods transported.
  • The price at which the product to the customer was not matching with that of MRP of the product reflected in the packet transported.
  • That is the reason for detention of vehicle and the seizure of the goods.
  • The Authorities immediately issued a show cause notice under section 129 of the Act.
  • The petitioners submitted their reply which was not convincing, satisfactory or acceptable.
  • Therefore the impugned order was passed.
  • The petitioner is having the recourse to filing appeal before the Appellate Authority and therefore the writ petition is not maintainable.
  • Subject to the compliance of the order the goods will be released to the petitioners.

The High Court heard the arguments put forth by both sides.  The High Court observed that when the vehicle was intercepted the driver of the vehicle was in fact carrying the requisite documents, which he was supposed to carry in the course of transportation of the goods.  The only observation made by the authorities concerned is that the valuation does not seem to have been properly conducted.

The High Court further observed that merely because the manufacturer sells his products to its customer or dealer at a price lower than the MRP, as such cannot be a ground on which the product or the vehicle could be seized or detained.  If at all this is contrary to the law the authorities are supposed to draw an appropriate proceeding under the law.  In the present case the details in the invoice bill as well as in the e-way bill matched the products found in the vehicle at the time of inspection except for the price of sale.

The High Court relied on the judgment of Kerala High Court in ‘Alfa Group v. Assistant State Tax Officer’ – 2019 (11) TMI 943 - KERALA HIGH COURT   In this case the Kerala High Court held that there is no provision under the GST Act which mandates that the goods shall not be sold at prices below the MRP declared thereon.  The scheme of the GST Act is to facilitate a free movement of the goods, after self assessment by the assessee concerned, the Authorities cannot resort to an arbitrary and statutory unwarranted detention of goods in the course of transportation.  The High Court further held that such action on the part of the department officers can erode public confidence the country’s economy itself.    The High Court directed the Authorities to release the goods.  The High Court further directed the Commissioner, Kerala State Taxes Department, Trivandrum to issue suitable instructions to the field formations so that such unwarranted detentions are not resorted to in future.

The High Court was of the opinion that since the case of the petitioners at the outset itself was that the entire proceedings for detention of the vehicle and the seizure of the goods are in total contravention to the GST law, relegating the petitioners to avail the alternative remedy of appeal under section 107 of the Act would not be proper, legal and justified.    The High Court also found that the proceedings of detention and seizure of the goods and the vehicle by the respondents is without any authority of law.

The High Court held that undervaluation is not a good in the invoice cannot be a ground for detention of the goods and vehicle for a proceeding to be drawn under Section 129 of the Act read with Rule 138.  The High Court held that the order passed under section 129 by the Authorities is unsustainable and deserved to be set aside.    The High Court directed the respondents to release the goods belonging to the petitioners based on the invoice bill as well as e-way bill.


From the above discussion it is clear the valuation is not a ground for seizure the vehicles and the goods.  If there is any doubt on the valuation it is proper for the proper officers to refer the case to the Adjudicating Authorities to initiate proceedings against it.


By: Mr. M. GOVINDARAJAN - September 17, 2020



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